Cairo - Mubasher: Pharos Research has maintained the fair value (FV) of Delta Sugar at EGP 36.43 per share, with an "Overweight" recommendation.
Delta Sugar’s revenues rose 78.7% quarter-on-quarter and 95.9% year-on-year in the second quarter of 2017.
Volume recovery grew 5.6% year-on-year during Q2-17, and Pharos updated the volume decline to 20.8%, which is higher than its forecasted decline of 36.8%.
Delta Sugar is trading at a price-earnings ratio (P/E) of 6.5x and 7.1x for 2017 and 2018, respectively, Pharos Research said, adding that “comparative valuation implies that [the stock] should be priced at EGP 44.70/share.”
Pharos noted that the firm’s stock is facing some obstacles due to the drop in international sugar prices which will lower Delta Sugar’s prices, depreciate the Egyptian pound, as well as profit margins.
Moreover, sugar producers in Egypt have been focusing on exports to obtain foreign currency, while “the government is taxing sugar exporters EGP 3,000 per metric tonne to incentivise them to sell locally instead,” in order to close the current supply gap, the research company concluded.
